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Income Tax Appellate Tribunal, “SMC” BENCH, BANGALORE
Before: Shri Chandra Poojari
O R D E R This appeal filed by the assessee is directed against the order of the CIT(A), dated 26.08.2019. The relevant assessment year is 2016-2017.
The assessee has raised following grounds:- “
1. The learned CIT (Appeals), Bengaluru-2 has erred in passing the order in the manner passed by him. The impugned order being bad in law is required to be quashed.
2. In any case and without prejudice the order having been passed in total disregard of and in violation of the principles of natural justice, makes the order bad in law and liable to be quashed.
3. In any case and without further prejudice, the CIT (Appeals), Bengaluru-2 has erred in : (a) Disallowing exemption u/s 54F amounting to Rs.12,49,550.
(b) Consequent to the addition, the learned CIT (Appeals), Bengaluru-2 has imposed the tax liability including interest of Rs.3,06,465.
4. The learned CIT (Appeals), Bengaluru-2 has erred in making various observations and coming to various conclusions that the investment in the name of spouse does not qualify for exemption u/s 54F such conclusion is against the provision of law.
The appellant denies the liability to pay interest. The interest having been levied erroneously is to be deleted.
6. In view of the above and other grounds to be adduced at the time of hearing it is requested that the impugned order be quashed.”
Briefly stated the facts of the case are that the assessee is an individual. For the assessment year 2016-2017, the return of income was filed on 27.02.2017 declaring total income of Rs.21,59,300. The assessee was a joint owner of residential immovable property. During the year under consideration, the appellant sold a residential property and received her share of sale consideration of Rs.58,70,000. The share of cost of acquisition of the said property was of Rs.36,84,683. The indexed cost of acquisition of the said property is Rs.46,75,050. The assessee has claimed the entire long term capital gain of Rs.11,94,950 as exempt from tax u/s 54F by purchasing a new residential property in the name of her husband. The Assessing Officer concluded that the provisions of section 54 do not provide for investment in the name of husband / spouse and therefore the exemption u/s 54 was disallowed.
Aggrieved by the order of assessment, the assessee went in appeal before the CIT(A). The CIT(A) upheld the view taken by the Assessing Officer, by observing as under:-
“6. I have considered the above grounds of appeal
, statement of facts and written submissions filed by the appellant. The appellant was a joint owner of residential immovable property. During the year the appellant sold a residential property and received her share of sale consideration of Rs.58,70,000/-. The share of cost of acquisition of the said property was of Rs.36,84,683/-. The indexed cost of acquisition of the said property is Rs.46,75,050/-. The appellant has claimed the entire LTCG of Rs.11,94,950/-as exempt from tax u/s.54F by purchasing a new residential property in the name of her husband. The Assessing Officer has concluded that the provisions of section 54 do not provide for investment in the name of husband/spouse and therefore the exemption u/s 54 was disallowed. Appellant placed reliance on decision of Honorable High Court of Karnataka in the case of DIT vs Mrs.Jennifer Bhide ITA 169/2011 (349 ITR 80), Mahadev Balai vs. ITO - Honorable Rajasthan High Court and CIT vs Kamal Wahal 351 ITR 4 - Honorable Delhi High Court. The appellant submitted that both the Honorable High Court Rajasthan and Honorable High Court Delhi referred to the decision of Honorable High Court of Karnataka in the case of DIT vs Mrs. Jennifer Bhide ITA 169/2011 (349 ITR 80). Therefore, it should be inferred from decision of Honorable High Court of Rajasthan and Honorable High Court of Delhi that the decision of Honorable High Court of Karnataka in case of DIT vs Mrs. Jennifer Bhide ITA 169/2011 (349 ITR 80) is applicable to the instant case. Further, the assessing officer at Para 8 of the order referred to the decisions of Honorable High Court of Bombay in case of Prakash vs ITO 173 Taxmann 311 (BOM) being counter judgment. The assessing officer in his order has distinguished the case laws of Mrs. Jennifer Bhide ITA 169/2011 Mahadev Balai vs. ITO ITA No. 136/2017 - Honorable Rajasthan High Court and CIT vs Kamal Wahal 3511TR 4 - Honorable Delhi High Court relied on by the appellant and relying on the decisions of Honorable High Court of Bombay in case of Prakash vs ITO 173 Taxmann 311 (BOM) has rightly denied the claim of exemption u/s 54F made by the appellant. I do not find any infirmity in the order passed by the assessing officer and therefore the grounds appeal are hereby dismissed.”
5. I have considered the rival submissions and perused the material on record. In this case the assessee sold property situated at Corporation No.13, Narayanaswamy Iyengar Street, Gandhinagar, Bengaluru on 17.02.2016 and received her share of consideration of Rs.58,70,000. The assessee claimed exemption u/s 54F of the Act, by showing that the assessee has acquired a new residential property situated at 25 & 26, 5th Cross, Gandhinagar, Bengaluru for a consideration of Rs.1,35,38,200 on 09.06.2015. The said property was jointly held by the assessee with the following persons, viz., (i) Sri. Manikchand Baldota, (ii) Smt.Maina Baldola, and (iii) Sri.Dhanpal I.Sakaria. Shri Dhanpal I.Sakaria is the husband of the assessee. The Assessing Officer as well as the CIT(A) denied deduction u/s 54F of the Act, as the assessee has not invested the sale consideration in her name. Section 54 reads as under:-
“Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head “income from house property” (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date [construed, one residential house in India], then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say, -”
5.1 It is important to note that the plain reading of the provisions of section 54 provides that the deduction / exemption under the section is available if the gain from transfer of residential house is reinvested in another residential house subject to conditions as stipulated in section 54. Nowhere the provisions of law require that the new residential house should be purchased in the name of the assessee. The basic condition is to invest the capital gains in new residential house. Further, the jurisdictional High Court in the case of Deputy Commissioner of Income-tax v. Mrs.Jennifer Bhide [(2012) 349 ITR 80 Karn.)] wherein it was observed that when the capital gain arises from the transfer of long term capital assets to an assessee and the assessee has within the period of one year before or two years after the date on which the transfer took place, purchased or within the period of three years after the date of construction of a residential house, then instead of capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the provisions of section 54 of the Act, which grants exemption from payment of tax there under. Therefore, in the entire section 54, the requirement that the purchase to be made or the construction to be put up by the assessee, should be in the name of the assessee, is not expressly stated. Therefore, to attract section 54 of the Act, what is material is the investment of the sale consideration in acquiring or constructing residential premises. Once the sale consideration is invested in any of these manners, the assessee would be entitled to the benefit conferred under these provisions. In the absence of an express provision contained in these provisions that the investment should be in the name of the assessee only any such interpretation would amount to introducing words in the provision which are not there. The Court could not legislate when Parliament has deliberately not used those words in the section. The same view was taken by the Hon’ble Madras High Court in the case of CIT v. Gurnam Singh [(2010) 327 ITR 278 (P&H)]. The Hon’ble Delhi High Court in the case of CIT v. Kamal Wahal [351 ITR 4], held that “it thus appears to us that the predominant judicial view, including that of this Court, is that for the purpose of section 54F, the new residential house need not be purchased by the assessee in his own name nor is it necessary that it should be purchased exclusively in his name. It is moreover to be noted that the assessee in the present case has not purchased the new house in the name of a stranger or somebody who is unconnected with him. He has purchased it only in the name of his wife. There is also no dispute that the entire investment has come out of the sale proceeds and that there was no contribution from the assessee’s wife.” Being so, in my opinion, the Assessing Officer has to see whether the investment in the new residential house has been made out of the sale consideration received from the sale of property situated at Corporation No.13, Narayanaswamy Iyengar Street, Gandhinagar, Bengaluru. If the purchase of new house situated at 25 & 26, 5th Cross, Gandhinagar, Bengaluru, was made out of sale consideration on transfer of capital asset, then the assessee is entitled to deduction u/s 54F of the Act. Accordingly, I remit this issue to the file of the Assessing Officer with the above observations for fresh consideration.
In the result, the appeal filed by the assessee is partly allowed for statistical purposes.